Roaste.com (pronounced ROAST-ee) is a specialty marketplace with approximately 2,200 coffees from over 100 vendors and expects an additional 150 roasters by year-end. Three-year-old Roaste, recently relaunched with an expanded site, has more than 10,000 customers. Founders Scott Lush, 43, and Eyal Rosen, 40, say the site creates a sense of community for users who can now write reviews and engage with fellow coffee lovers on blogs. For example, one contributor praises an espresso blend for its "buttery mouthfeel," while another critiques an Ethiopian organic for its "unpleasant smoky bergamot" flavor. Lush and Rosen, who discovered a shared love of coffee while working at Alcatel-Lucent (ALU) eight years ago, started the company in their Boston homes. They expect to triple revenue to $3 million next year.

Chazzano is a small roaster based in Ferndale, MI, that roasts exotic varietals. For small specialty coffee vendors like Chazzano, who want to expand beyond their local market, Roaste.com offers a unique opportunity. After gaining popularity locally, Chazzano is looking to grow. Partnering with Roaste.com provides an opportunity for a national presence and market growth without sacrificing time for roasting exotic varietals. For its services, Roaste keeps up to half the retail price of coffee sold on the site, roasters say. When an order comes in, Roaste sends the vendor an email with the customer’s address. Most vendors roast the beans within hours and mail the package the same day. They receive prepaid postage labels from Roaste, which also handles returns. "It’s very convenient for me—like, brainless," says Tracy Swanson, who oversees marketing for Avion Coffee in Hayden, Idaho. Swanson uses Roaste to expand her $200,000 wholesale business into online retail and notes her sales on the site have doubled annually since she signed up in 2008.

This description is excerpted from Bloomberg Businessweek.

Questions:

1. Consider the distribution network for coffee described in this passage. What type of distribution network does Roaste employ?

2. Where is the inventory held in the network? What can you say about the inventory costs?

3. Comment on the impact of the distribution network on customer experience.

4. What impact does the network structure have on transportation cost? How does it compare with the transportation cost of a retailer like Starbucks that sends truckload shipments of coffee beans to its stores?